Hello, and welcome to the Votes and Verdicts podcast, hosted by the litigation and policy team at Bloomberg Intelligence, the investment research platform of Bloomberg LP. This podcast series examines the intersection of business policy and law. I'm Elliott Stein, an analyst with Bloomberg Intelligence covering financials litigation.
And my name is Nathan Dean, and I'm an analyst with Bloomberg Intelligence covering financials policy.
So our topic for today is one of the subjects that is going to dominate the news headlines throughout the year. Washington, DC. What can we expect to come out of Congress, from regulators and the White House in twenty twenty four? Will Congress pass any legislation this year that will have an impact on your portfolio? While regulators increase their rulemaking pace this year to finalize items before the twenty twenty four elections and perhaps to get ahead of a ruling on
the Chevron case. How will the elections shape US policy for years to come? How should investors think about a potential rematch between President Biden and former President Trump. Joining us today to help answer those questions are some of the best individuals distributing policy research and analysis to Wall Street, and we could not be more delighted to have them on our podcast. First, we'd like to introduce Henrietta Treys,
director of Economic policy Research with Vada Partners. Henrietta has provided investors with economic policy analysis for over fifteen years on a broad set of topics, including financial services and healthcare reform. She is also in a lum of Congress, having worked for the Senate Finance Committee and as a research fellow for a congressional member, and she's also a frequent contributor to Bloomberg TV and Radio. Henrietta, Welcome to the podcast.
Thank you so much for having me. Grilled to be here.
And also joining us is another contributor to Bloomberg TV and Radio. Isaac Boltanski Managing director and Director of Policy Research at BTIG, where he is responsible for coordinating the firm's Washington policy analysis and forecasting how potential policy shifts could impact investors, corporations, and other market participants. Prior to BTIG, Isaac was the director of policy research at Compass Point Research and Trading and also served as a research analyst
on the Troubled Asset Relief Program TARP. As many of you, I'm sir know it a TARP Congressional oversight panel. So, Isaac, welcome to the Votes and Verdicts Podcast.
Thanks for the invite, Happy to be here with both of you. I appreciate your research, and always good to be with Henrietta.
Thank you both. So for our regular listeners, we're gonna do things a little bit differently for this episode because we have this great panel of Washington experts, So we're gonna sort of do this as a round robin of sorts, asking you know, some of the key questions that we've that are on our minds, on clients' minds, on investors' minds. So, without further ado, let's get right into it. Let's talk
about predictions for twenty twenty four. Henrietta, why don't we start with you and then Isaac and Nathan, you guys can jump in after. I'd like to, you know, start with, you know, sort of a broad question, what is the one thing in twenty twenty four a key prediction that you think the market is out of consensus on. Is there something that markets aren't paying attention to, whether it's legislative, regulatory, or from the executive branch?
Oh Man, Where to start I would say that the most frequent conversation I have with investors is really around FED interest rate cuts.
When's that going to start? When's it going to end.
There is a prevailing view in any meeting I go to that the Fed is going to hold off reducing interest rates as we get closer to the election, and I disagree with that. That's not my experience having worked closely with those agencies during the Great Recession. You know, whatever the FED needs to do, whenever they're going to need to do it, they will act. I think that will be independent of a lot of sort of political
maybe conspiracy theories. I sometimes think about them as But expectations is for starting cuts in March and going through maybe August September. I think if they need to go well into September, they will do so.
So that's one big one.
The next big disconnect is really just a commitment to the idea that there will be another candidate on the twenty twenty four presidential election ballot that is not named Biden or Trump.
We get that a lot.
Every single room I walk into, we have that conversation for a long time, you know, ten fifteen, twenty minutes just spitballing ideas about who else could it be, what happens if one of them drops out? If this were any other two people in any other year, I don't think anybody would question the lock that Donald Trump has on the Republican Party.
And Joe Briden is the Democratic nominee.
He is the preferred candidate of eighty three percent of Democrats now and I expect that will rise.
So I don't see a path forward for other candidates.
By the time y'all publish this podcast, maybe we'll have more information out of New Hampshire. But after New Hampshire, I think the primary season is done, and then investors will really start potentially being able to bake in what their expectations are for the election. There is probably the most to do on the tax front, and then also on the trade front. So those are two areas that I focus on heavily with clients, and.
We'll talk about some of those issues some more in terms of congressional and presidential priorities. But sticking on twenty four key predictions, Isaac, anything you want to anything to keep it in an eye on.
Yeah, Look, I think Henrietta's right.
The number of conversations I have where people are just high on hopium regarding some other candidate riding in to save the twenty twenty four election. Nobody wants it to be Biden v. Trump, but it's going to be Biden v. Trump, And I think that there is definitely in the investor community some hope that there'll be another set up.
I just don't see it.
So I think really getting our arms around understanding what's going to be an ugly and emotionally exhausting election cycle,
because that is what it's setting up as. I would also say that I don't think that market's fully ready yet for the absolute flurry of rule making that we're going to get from the agencies in advance of the Congressional Review Act, deadline, advance of the Chevron ruling, advance of the election, and so you know, you can you can pick any part of the alphabet soup that runs down, and they're trying to get these papers out and done as soon as they can, because look, we get into
May of this year, and if you are releasing something after that, you may be in trouble. In terms of the Congressional Review Act, which allows for an expedited means of reversing a rule, and so I think that's the one area that I've been highlighting in terms of something that might not be that sexy but could have an enormous impact for certain sectors with real finalization.
I was just going to say, often comes litigation, So which is what I covered. So I'm looking forward to back. All right, Nathan, what did you want to tie name it?
So I was gonna just echo Isaac's comment about the rule making. I mean, even if you just look at the SEC calendar, they're starting with a rule on specs on January twenty fourth, and I think they're just going to go straight through. It's almost gonna be like primary season for the SEC. They've got so much stuff on the docket. But my one prediction that I'm going to go out there is I'm going to say that the Puzzil three and is finalized.
I don't think.
I think there is a growing consensus in Wall Street and amongst the banks that this may not happen, and I certainly don't. I certainly think there is a decent chance that it may not happen. But if you look at the regulatory agendas that the regulators, the FED, the OCC and the FDIC to put out. They've said that their goal for finalizing the Bosle three.
End game is June.
Now, that is so fast in terms of going from proposal to finalization and so forth like that. But like Isaac has pointed out, you know, you've got a Congressional Review Act out there, You've got this potential for a GP victory out there, You've got a lot of things that are just uncertain for the regulatory framework going forward. So I think you're going to have to make massive changes.
And we can talk about this later, but as of right now, we're still saying sixty percent chance that the Buzzle three end game gets out this year.
Let's stick Let's stick on that for a moment. Isaac or Henrietta, either of you think they don't get it done by their anticipated timeline of what did you say, married June?
Yeah, you know, I could see it slip, but I still you know they're they're aiming for June. And and this says everybody knows those those dates aren't set in stone, but uh, I think they're gonna right now. They're proceeding is if they're going to finalize it this.
Year, And the comments have been voluminous, as I'm sure you guys all saw. So Isaaca Henry had any thoughts on on the timing, I'm.
I'm happy to jump in on this one because I've I've spent the past day and a half of my life reading comment letters, and god knows, I'm not going to get bad time back. But you know, my view is, I don't think they're going to have it finalized this year. I think that the odds of a reproposal have have
increased meaningfully over the past few weeks. I think that the letters that you've seen from the Hill, as well as everything I've been able to pick up in regards to some consternation within the agencies and the principles in the agencies, and then you throw on top of it some of these comment letters where you have a pretty diverse set of folks expressing concern regarding this proposal and
it's economic impact. So look, I'm taking the over on that I'm not as fearful of the Congressional Review Act. One of the peculiarities of the Congressional Review Act is that if you do use it, which by the way, they don't really like using it for financial services issues. When you know, they're going to have control of these agencies shortly after, so they can just change the issues
at hand. But then also it effectively salts the earth for new rule making anything that's substantively similar, which Elliott hasn't been fully litigated yet, so there's still questions around that, of course. But look, I'm taking the over. I think that they're going to do an impact study that's going to take time. I think they're going to work to find a way to try to handle some of the low hanging fruit, everything for mortgage to the treatment of
corporate loans. But they're massive fights over the use of internal models and other things that lead me and believe this is going to slip into the end of twenty four and maybe even twenty five if they decide to repropose.
All right, Nathan with the under, Isaac with the over, Henrietta, you want to be peace maker or his side with one of these gentlemen.
I very much agree with Isaac on the level of consternation that's coming out, and I don't think Nathan is discounting that at all either.
What's interesting from my perspective is the.
That the reach that the complaints have been able to secure so you know, whether it's a healthcare conference or you know, Jamie Diamond is out speaking somewhere. The trickle down effect of somebody at the top having a negative reaction to these rules and proposals is so widespread that it's covered the blanket at the whole street at this point. So I'd expect exactly the dynamic Isaac is talking about.
Just to get louder I did not spend the last day and a half reading those complaint letters, so thank you for doing it, Isaac.
You're waiting for the movie. Yes, all right, let's uh, let's which gears a little and talk about Congress. So we're recording this on January eighteenth, and at this time, Speaker Johnson and congressional negotiators are still trying to find a deal to keep the government open, and so because of that, we're not going to talk about, you know, a potential government shut down, since that issue could be
resolved by the time this episode there is. Maybe maybe not, but I do want to focus a little bit on congressional priorities for twenty twenty four from Speaker Mike Johnson. Once we get past this government funding issue, can Speaker Johnson effectively run the House? What are his priorities for the coming year? Can he handle you know, the many internal disagreements that he has with his party, similar to what we saw recently when twelve Republicans helped bring down
and otherwise ordinary rules vote. Do you even think he'll be speaker at the end of twenty twenty four? So a lot of questions that I wanted to sort of throw out there, Isa, think, why don't we start with you this time?
So the initial question is does Speaker Johnson is he able to effectively manage the house? The answer is no. What's the next question? You know, I think it's been pretty clear that this is an ungovernable house. And when I and I would even take a step farther and to say, you know, look, we're an earning season now. An earning season is all about expectations management, And boy, oh boy, was the bar set low for one hundred and eighteenth Congress and somehow they can't even clear that
low bar. And that's what you have when you have margins this this tight on each side.
And so look, I.
Think that we are we are gearing up to get a Christmas tree done and I'm very interested in what Henrietta and Nathan think on this, But I do think that there's a path forward on one of these catch all bills that everyone gets to hang their ornament on. But no, I don't expect much more, And really I think it's it's almost an impossible task with the margins where they are in the way that our political discourses
has unfolded over the past few years. So no, I don't think that we should expect much more than the absolute bare minimum. And let's just hope they can even do that.
Always good to go with the under with on what Congress is going to get done. Nathan thoughts on this, Yeah.
So you know, I do think Speaker Johnson's going to be Speaker at the end of the House. I think he's somewhat called a little bit of a bluff during the most recent government funding deal when he refused to back off his one point sixty six or one point five to nine trillion dollar government spending bill, depending who
you talk to. They think they somewhat disagree on the top playing number here, But I echo Isaac's comments that I think once they figure out this spending package and they avoid this automatic sequester that's coming on April thirtieth. You know, if we're still under a cr there's a one percent sequester coming. Once they figure that out, and
I think they will. I think folks are just going to say we're tired, We're going to go to the election, you know, spend the entire summer, because you know, I often tell it to clients that when Congress is stuck here in Washington doing this stuff, like let's just say that somebody tries to kick Speaker Johnson out and they're going to have like ten days of trying to figure out who the next speaker is. That's ten days that your opponent is out in your district campaigning against you,
if you're in the House. And so I certainly think that most of the folks over in Congress will say, look, let's just get our end of the year priority set up in May or June. Let's just call it what it is. Let's go for the election. And obviously there are things like Ukraine and Israel and border security, and I'm going to defer to my other two guests on those because they are better versed than that than I am.
You know, all that stuff has to get resolved, but there will come a point where like, look, I'm just thinking about November and I don't care about anything else.
Henrietta thoughts on this.
Yeah, my favorite thing.
I don't know if my client it's like enough, but I always go by the Congressional calendar. I find it to be deeply informative and helpful in predicting when they will come up with conclusions. So right now as we speak, the House and Sentative reached a deal on voting on the CR so.
They can get out tomorrow before the storm.
But if you look ahead, it sounds like we've got a good deal of time between March first and March chase, but they're in session almost none of February, so we, by functionality, have to have another CR. And this is going to be a tightrope walk for Speaker Johnson. I suspect he will succeed. The guys have kind of alluded to a dynamic that I think is really informative here, which is that members remember the three week period where they were trying to re elect a new Speaker and
that was awful. They've gone through their whole roster, so at this point Speaker Johnson is not really somebody that they're unwilling to bash. Obviously that's happening, but there's no other candidate, so he's going to do exactly what Kevin McCarthy did, which is just move the needle, move the ball down the field every couple of weeks by four, six weeks at a time. And I think for investors the sequester is of interest, mostly on the defense side. We have a lot of defense clients who want to
know when spending cuts are going into effect. With ninety percent odds, I think the sequester will never go into effect. I was in Congress when they were writing the Budget Control Act, and if you remember that one trillion dollar sequester, the most notable thing about it was that it never happened. So I suspect that will happen this time around as well.
But if you really wanted to look and.
See when a major spending bill, the Christmas tree kind of idea that Isaac is referencing, I don't think it's coming in February because they're not in session, but the period between March fifth and April eighteenth is one we'll see the next big spending bill written, and probably the last bill that they pass all year. Aside from regulatory stuff, We're not going to see anything out of DC. There is no tax bill that's going to pass. There is
no additional stimulus coming down the pike. We are just going to fund the government at the most basic of levels. I do think that we will get an international aid package, in no small part because we also need fifty five billion dollars in domestic aid for things like back billing FEMA, things like wildland firefighters, some broadband components that a lot of investors are interested in seeing renewed.
So I do think that there is.
Enough money to throw around to get these guys to vote on a bill before they leave down and go campaign. And of course that's my politics usually works. Pork barrel spending gets the job done.
What about crypto and something getting done in Congress on crypto? I know, you know, it's been talked about a long time. You know, there have been cryptocurrency frameworks proposed, some of them bipartisan. You know, I think there is talk about maybe a stable coin bill getting done first, potentially. Wondering if you guys had any thoughts on this, Nathan, you want to go first?
Yeah, So what I told my crypto clients is that they need to start paying attention to twenty twenty five. I mean, like they are more better framed the courts, you know, like the coin based SEC court that I know Elliott was visiting yesterday and we'll have his analysis out on the terminal for that. But I don't think Congress is going to be doing anything now when it comes to stable coins. I even have said as soon as late December that I thought a stable coin bill
could get done. And the reason being is is that there is a regulatory gap that I think pretty much anybody can agree on when it comes to stable coins, you know, other than SEC Chairman Gary genslerre viewing them sort of like a money market account. There who regulates the stable coin. Nobody really knows, and so I think there is general agreement on that they can get there on a stable coin, having it one hundred percent backed by high quality liquid assets and have it registered with
the FED and or another regulator. The question is can something get done into Congress, like we just allude to, is so toxic and so at the end of the year, I even put in one of her predictions, I thought there was a sixty percent chance every day that we goes. I just feel less and less certain on that. And so if there's any crypto investors out there listening to the podcast right now, I think it's more importantly to watch the courts and see what happens in twenty twenty five.
But just remember, even as of yesterday, President Trump gave a statement that there's no way, in his words of way, no chance of ever having essential being digital currency. So you know, what you get in twenty twenty five may not be what you want to see either.
And I wasn't in court yesterday for the SEC versus Coinbase here in in my note Nathan is already published on the terminal this morning. I like Coinbase's chances in that case, which raises a question which we can throw into the next for you all. Let's say the SEC loses and loses badly, and that they're theory of evacuating crypto. You know, one of the securities laws gets rejected by
the courts. That and motivate Democrats in Congress to play ball a little more with Republicans in terms of legislation. I'll add to the next Henrietta, do you want to go next talking about this issue?
Yeah, I'd back up to the thirty thousand foot view on that one. I think Democrats and Republicans both have a substantial interest in engaging on the topic because that legislation is going to be a lobbying bonanza. It's a great opportunity for fundraising. I think any member would like to be one of the co sponsors.
Of legislation on this. It's just a matter of getting the details correct.
And one thing about DC that is universal is that they are very lumbering when it comes to learning about a new product.
I mean, they still haven't adequately regulated the internet to internet sales.
So to do crypto as quickly as we're asking, I think is to sort of miss that Congress loves to take its time. These things are great opportunities for members to get their name out there, may press comments, differentiate themselves on the campaign trail. So I do expect that there will be legislation, but I wouldn't expect it anytime soon, certainly not this year.
Got it, Isaac? You want to turn in?
Yeah, Look, it's all so silly.
We spend so much time talking about these crypto bills, and the stable coin bill was actually a good bill. They still haven't really figured out what to do with state regulatory authority, and that's a huge, huge issue, and until they get that handled, I just don't see that moving. But that's a good bill. All of the other bills are just nibbling around the edges. It's absurd to me how much time we spent talking about some of these
leading bills that don't actually define what a security is. Right, we're still dodging the huge central question of all of this, and so look, I don't see Congress doing anything on this. I think that we've got to keep in mind a lot of democratic lawmakers feel really burned by the crypto world. A lot of these lawmakers staffers spent the past year scrubbing the social media profiles of their bosses to make sure there weren't any pictures of them with Sam Bankman
Freed left up right. So there's definitely some are more from the democratic side, and they think that they've got their regulators in and the regulators will handle it. So Congress, I just don't see them actually moving on this, and I think it's all going to be in Elliott's world. We got to keep in mind the biggest news of the past few weeks in digital assets were these ETFs being approved? Why did they get approved because of the
gray scale court decision. Right, it's the courts who are going to force us, and that takes time.
But that's why you got to read what Elliott writes.
Thank you, thank you for that endorsement. I appreciate that. All right, let's move on down to the White House down Pennsylvania Avenue, where you know, as you've talked about, President Biden is likely running for the election against former President Trump, and so let's talk about some of President Biden's goals between now and the election. What do you think his key goal is going to be before between
now and the election, if he has one. Are there any policy catalysts that you anticipate focus on before November. Let's see who goes first here, Henriette, I want't you go first? Sure?
I think there's two things for the president to do.
Bring abortion back to the fold, make sure that that's a front, top of mind issue for voters. It was able to sway every single election, even in a nine percent inflation environment that we've had since the Dobbs decision, So it is clearly an effective and permanent source of galvanization that Democrats must seize on. The good news for Biden is he's not going to have to try very hard. The Supreme Court is going to rule on a very important case that will determine the process by which fifty
percent of abortions in America are conducted this summer. So it's a natural development that the administration can take advantage of. And I think it'll be very difficult for the Republican Party to distance itself from the fact that Rob Wade was overturned because of Trump's Supreme Court nominee endorsements and picks beyond abortion, which in my opinion and experience shows is efficient to win Democrats and election despite hardships on
the economy side. You do want to see the administration get a serious reality check about their messaging on the state of the US economy. Thirty percent of Americans believe that we are in an economic recovery. The remaining seventy percent believe we're in stagnation, depression, or recession. That is a disconnect that has I think no room to go lower because it's preposterously out of balance, and a lot
of room to go higher. So the Biden administration has a ripe opportunity to build the big mo which in politics is all important, especially coming out of Super Tuesday March fifth, and then they'll have the State of the
Union on March seventh. It's a good opportunity for the Biden administration to really pivot to exclusively talking about a three point seven percent unemployment rate, the best inflation on the globe, strong GDP growth, and no recession soft landing, which we can debate how long that will be sustained for, but if that has occurred, all.
Right, you want to jump in here, Yeah, I make you a point to never disagree with Henrietta when she's absolutely right.
I mean, that's that's the that's the that's one of the core political focuses.
I'll just add a little bit more from my seat that I think we should be prepared for when we talk about the economy. The White House has really gone all in on this junk fee push. We saw yesterday the Consumer Financial Protection Bureau released a rule regarding bank
and credit union overdraft fees. I think that we're going to see the CFPB finalize its credit card late fee rule right around the State of the Union that Henrietta mentioned and that's going to get some primetime, so that'll continue on on the economic front, they think that they've got a winner on that end. And also, look, you know, the other issue that's come up over the past few weeks is I do think that they're going to alter the treatment of cannabis under the Controlled Substances Act and
move it from Schedule one to Schedule three. I know that's probably flight under the radar for some folks, but that's another part of I think their election year to do list, and they've they've set that up for movement I think in the next couple of months.
And Nathan, anything you want to time in with.
The only other thing I would add is that I would expect more talk about infrastructure and the Inflation Reduction Act, because you know, we had news reports at the end of the year and this was never verified, but news reports that President Biden was quite upset that he wasn't as getting as much play for those infrastructure related projects, which you know come in in this case in the variety of tax credits and tax incentives and so forth
like that. And you know, I think that you know a lot of investors, especially non US investors, want to know what the future of the Inflation Reduction Act is if somebody like President Trump were to come into office, and so I think you're going to see.
Maybe not so much.
Look, I don't think going out to you know, Nevada and saying we got the Inflation Reduction Act. I don't think that's going to sway as much votes as like abortion or something else would. But I do think that maybe in the business community you may see a push from the White House to try and highlight some more examples of these tax incentives and solar energy, clean energy
and so forth like that. So that's one of the things that we're interested in the election more so of is that where do all these carrots that are in the IRA fall, you know, in twenty twenty five.
If I could just say briefly on that, Nathan, I think that's such an excellent point. There's so much economic activity that has been sort of locked up and delayed because it took so long to get the tax rules written for those credits.
And one of the most.
Frequent things I hear when I speak with Republicans is really reminiscent of the Affordable Care Act, and the Republicans and Trump have seized on the IRA as just being vehemently opposed as sort of like a knee jerk reaction.
And that's all fine, and well, you know, nobody likes eighty billion dollars in IRS.
That's fine, But it's the tax credits that are so economically effective that haven't even gone out yet, that are going to unlock billions of dollars in private equity across the entire South, which is where a lot of those
jobs are going to be created. So it's a great opportunity for the Biden administration to put Republicans who are happy to run in the anti IRA basket, but their districts and their seats benefit greatly from the job creation and the economic activity they'll be spurred by those tax credits. So it's a great way to put Republican lawmakers between a rock and a hard place.
I would say focus on Georgia.
The President needs all the help you can get there if he wants to repeat at twenty twenty, this would be a good opportunity.
I was going to say, if anybody from the White House is listening, I think at the greater Atlanta area is probably one of those areas that you want to put the IRA adverts up for.
Couldn't agree more.
Speaking of Fulton County, let's talk about President Trump's legal issues and how those might play in an election. Does that you know, does anyone here think that, you know, the many indictments and several cases that he's facing will prevent him in any way from from obtaining the nomination
or winning the presidency. I just saw the chart the other the other day showing that, you know, his polling was declining and the santises and disantans at least was rising up until the first indictment of Trump, I believe last March or so, and then you know, Trump's numbers started going up. So what are your thoughts on that, Isaac? Let's start with you.
I feel like a lot of it is is honestly a distraction from what investors care about, which is who is going to be the nominee. Trump is going to be the nominee. I think that the indictments that we've
seen have helped him. You can make that argument in the polling, but more so I just focused on the fact that a third of the GOP primary voters are going to vote for him no matter what, no matter who is on the ballot, no matter what issues are driving the news that day, and when we have this shift that we have to more winner take all primaries, it's just so clear that he's going to be the nominee.
So we have to track the cases. They're meaningful from a headline perspective for investors, but substantively I just don't think it matters because he is cruising to the nomination.
Yeah.
I got this question recently because the polling does suggest that Trump is benefiting from these indictments. He's obviously doing public relations campaignings by showing up at his civil trials
as well. The question that I encourage people to focus on, and I think the big defining feature of the current polling data which suggests that Biden and Trump are neck and neck, is that you still have a this optimism that somebody else is going to come into the race, and so moves the needle that I couldn't agree with Isaac anymore. It is so plainly obvious that Trump and Biden are the nominees. Anything that would change that is going to come from.
The voter base. It's going to come from the conventions.
Should we get to July and August, and need some sort of upsetting moment because of the trials, because of any other anomaly that might happen. But that's sort of an act of God event that I inherently can't play odds on. But that's really what people are waiting for. And you have to ask who is the trial helping with. Yes, he's fundraising, but it's not like Democrats are giving him money.
This is helping him with his base. He's turning out those small dollar donations from the buried voters who've been with him since twenty sixteen and would.
Never leave him.
So that is exactly the issue that a lot of the Republican establishment is trying to relay to everybody else that'll listen here, which is you get the third of Republican voters who are always going to back Trump, but you lose everybody else, as they have in every single election since twenty sixteen in a nine percent inflation environment.
It couldn't be any better for Republicans right now, and they cannot get past the fact that Trump is toxic to the majority of the rest of the population and has been consistently And that's why our odds here are sixty percent. That Biden wins with the Republican Senate, twenty percent odds that Biden wins with a fifty fifty split in Democratic control of the Senate, and only twenty percent
odds that Trump wins. In which case, here basically pretending a red wave where Democrats stay home, do not come out to vote, and Republicans show up in huge numbers, and then you get a Republican White House, a Republican Senate, and probably a Republican House able to overcome the redistricting and things that have gone on last tuple years.
And then the CIA comes into playing in that scenario, Isaac, would you have to say something, Yeah, Look.
I think i'd also just throw in here and you know, shout out to the FED chairman here. I'm going to use the word humility on this. We should have a humility about this. Four months ago, no one was talking about war with Israel and Gaza. No one was talking about hoofy rabbles, and you know, the world can change, the world will change. So goodness only knows what we're
going to talk about a few months from now. And we've got to keep in mind the last election between these two was decided by three states and only about forty four thousand voters in those three states, and so I do think that we need to be cognizant of that slim majority in that reality, and also that no one knows what the issues of the day are going to be in six months, and so I think it's going to be a close election. I think that I
think that it's going to be a long election. And I think that we also need to throw into our calculus how the possible entrance of a third party candidate will damper enthusiasm, which Henrietta mentioned before for certain voter blocks in certain states, and it will be a turnout dynamic on that end driving the decisioning.
In November, you mentioned some of the unforeseen geopolitical issues around the world, So let's just stay on that for a moment and talk about China and Russia. Henrietta and Isaac, you know, what are some of the key concerns you think markets should have about foreign policy towards those countries in twenty twenty four. We've often heard you know that geopolitical risk is high this year, but do you think there's are there any key catalysts that you see coming?
Even though I know a lot of this is unpredictable.
Well, some of the predictable ones are coming from the Trade World. Ambassador Tie, the US Trade Representative, is gearing up to complete her four year review of the Section three oh one tariffs, which are of course three hundred and sixty billion dollars worth of goods coming in from China that have been tariff since the Trump age. She is going to complete that review sometime in the next
few months. And I suspect there are some tariffs that could come off specifically on this four A which are very consumer focused, but they're going to be replaced with equal and opposite tariffs on electric vehicles by every indication that she's giving us. And so when you think about geopolitical tensions, imagine how that is responded to by the EU, by Japan, by Taiwan, and then how China decides that
it needs to retaliate. So I do think that that's a flashpoint that will come, and it behooves both Trump and Biden and any other person up for a re election this year to bash China. Eighty three percent of Americans are very happy to bash China right now. I can and see it as our biggest sort of existential threat facing the United States. So I suspect that will ramp up as investor type of pairs to update the Section three or one tariffs.
Isaac, anything you want to say on this topic.
No, I think that's fair. I would just add I'm starting to get more and more questions about Trump's tariff policy, which obviously we can pull a thread on his ten percent tariff commentary. But I think once again we're going to We're going to have to see how much of this he means, how much of this is positioning. But that's something that I think some investors are starting to focus on now that they're coming to terms with the fact that Trump is going to be the Republican nominee.
No, I was just going to say.
The only thing I would add is the power of the presidency. For those, you know, non government policy folks that are listening right now, power of the presidency is so much more powerful when it comes to foreign policy, trade and so forth like that, because you can avoid a lot of Congress. So I think even if you get into a situation where a president Trump wins and there's like a gridlock, you know, House and Senate and
so forth, like that. It's just a lot of the headline risk we see comes in this foreign policy space without gaining any predictions. It's just good to keep in your hip pocket. Is that's usually a lot of the challenges in that space comes from the presidency in the headlines.
Yeah, i'd layer on here.
I mentioned that the outset that investors haven't really priced in the election yet, in part because they're hoping that there's another candidate. But when they do the universal baseline TIREFF, which really rolls off the time for the former president, for his campaign team, for Bob Leithheiser, who was obviously out work shopping the idea, it seems to be one of the easiest pillars for them to discuss after drill, drill, drill,
And I think investors really pay attention to that. And unlike in twenty seventeen and twenty eighteen when we were running up to the release of that investigation over IP theft and the implementation of those tyriffs in the first place, investors take this very seriously now, so they don't really
know what a UBT is. That's because it's something akin to the borderline sorry, the border adjustment tax that people remember from Paul Ryan's initial tax reform proposal, but it is the number one paid for in Trump's tax bill, and if I could have my way, I would have investors focused on tax policy every day. But the individual tax cuts that expired at the end of twenty twenty five are going to cost two point three trillion.
Dollars just to keep them even.
You're going to need some sort of revenue raiser or you will be blowing out the death said by two three trillion dollars. Now, they don't really have problems blowing out the deficit when it's one party control in Congress, so I don't have a concern with that. But the Universal Baseline tariff is the number one revenue raiser in the Trump platform, and they speak about it with ease, so I think it's appropriate for investors to take it seriously.
That's really interesting, all right. I have one final substantive topic that we wanted to just talk about, and it shouldn't take too much time, and that is the SEC and Chairman Gary Gernsler. What do you all think he does in twenty twenty four and do you think he sticks around in twenty twenty five? If President Biden wins reelection, and if he doesn't, where does he go next? Nathan? Why don't we start with you? Yeah?
So on the SEC actions front, I mean, one all one needs to do is go to the regulatory Agenda, which obviously is this wonky website that you don't need to look for. Just call us and we will get
you in touch with that website. But if you go to the regulatory Agenda, the SEC has like fifty rule makings on it, and not all of them are going to be finalized in twenty twenty four, but there's like probably twenty or so rules that the SEC has to get off their plate, from spacks which they're going to finalize on January fourth, to equity market structure, to this climate change proposal on whether or not it includes Scope
three or not. So where I'm going with this is that between January twenty fourth and this May time frame that Isaac alluded to earlier, I think the SEC is just going to be finalizing rule after rule after rule after rule, and then once this, you know, we get closer to the election, I think the SEC is going to calm down a bit now for whether Chairman Ginzler sticks around after the election. At President Biden wins, I
could see him maybe for a year or so. I have not heard anything about what his next wishes are. I could see him sticking around. But I think for him, it's the equity market structure, I think is what his most important. To call it legacy is because I think I think, you know, the SEC or the climate change rule could get overturned and so forth, So I think I think he's going to be more so about this
investor protection, customer protection, and so forth. A lot of these transparency initiatives I think are what he's really going to want to get out this year.
Although I got to think equity market structure rules are also going to get litigated once finalized. You know, no matter how much they're they're tweaked, and so in these cases, you know, if are most likely to survive. You know, if Gencer leaves, the litigation will still be around after he's gone.
I mean, I'm not a lawyer, but at this point I'll just go out there and say that the SEC can put out a rule saying the Earth is round, and somebody will soon in the Fifth Circuit. So you know, it's just one of those things that I think it's going to happen no matter what.
Henriettare any thoughts on Gensler and the SEC, Well, I do think.
It's an interesting time in the second term of a president.
In this scenario, obviously the assumption would be that Biden wins, you might want to go, you know, to the mat for the first year or two, and then after that, you know you're on the outside. The party is going to start switching over. We'll have fresh faces at the presidential level. We already have a fresh base in the House speakership with the Keem Jeffries, so there's a lot of opportunity for movement, best fresh braces to get in there.
I think there's a lot of work to do elsewhere, and I wouldn't be surprised if after a year or two we've would move on Isaac.
You know, let's take a step back.
It's pretty remarkable what we've seen over the past few years from the SEC. I mean, their agenda is longer than a Leonard Cohen song, as Nathan pointed out earlier, and it's pretty incredible what we've seen from there. But what I'm struck by is how much of it I think it's going to be struck down.
By the courts.
Right, I think that the private equity transparency proposal could be struck down. I think the climate change one could be struck down. On equity market structure, I am almost certain that if ialize, some of that will be struck down. And not to mention that I think some of it a bit preposterous given that our equity market structure actually functions pretty darn well. Every effort to kill payment for order flow over my fifteen.
Plus years of watching has died.
Because our current equity market structure that relies on payment for order flow is the worst system except for all the other options, right, it still gives the best outcome for retail investors, And so to me, when you think about the SEC, I think that many many of these proposals will be reversed by the courts. And in terms of what Chairman Genzler does next, I have absolutely no idea. I've heard that he was leaving seventy five different times,
almost exclusively from crypto investors, so who knows. But I do think that we need to be more cognizant and justus A good shout out again for Elliott of how many of these financial proposals are going to be challenged in courts from the CFPB's late fee proposal, which could come out any day and will almost immediately be challenged a basle to darn near everything the SEC is going to finalize this year, and so that that really underscores
the importance of the litigation part of this story for investors.
Yep, I agree with that, all right, and I'll just add that Nathan and I at some point I want to have Chairman Gensler and his twin brother on as podcast guests, but that is we'll see if that ever happens, all right, So that that's it for the substance of discussion. We always like to end our episodes with some fun stuff or maybe you know, difficult questions, depending on how you look at it. But this is something that Nathan
and I always ask our guests. If you are stuck on a desert island and could only bring three pieces of music, you know, whether it's songs or albums or an artist, what would you bring? Henrietta, let's start with you, all right.
Well, I'm as you know, I'm based here in New Orleans and it is fully marty grass season, so I refuse to move on from that and to my island. I'm bringing Alan to say, Professor long Hair, doctor John and Arma Thomas.
Can't go wrong with that. What about the radiators? Do you like the radiators?
The radiators?
Yeah, they're good too. Yeah, Okay, I'm good, all right, good, it's a party, all right, Isaac? How about you?
I mean, my favorite band of all time is the Band and so my answer is the Last Waltz. I think that if you have that, you really don't need anything else.
By the way, you are the second guests we've had to say that. Dan Horwitz, who we had on several months ago, also included the Last Waltz soundtrack as his go to for a desert island. All right, that's a good one, Nathan. You've gotten to ask this question many times, but I don't know if I know your answer.
You know, nineteen nineties rap, nineteen nineties alternative, pretty much anything that was put out between nineteen and two thousand, I will take to my grave.
All right, all right, this is good stuff. All right. Well, with that, I think we'll wrap up this episode of Votes and Verdicts. We are extremely grateful to both Henrietta and Isaac for appearing on this episode. I think this was a really informative discussion about, you know, one of the most important years in Washington, that that that will we'll have this year, and that we've had in a long time. So thank you to our listeners for taking
the time to join. And as a reminder, you can read all of our Bloomberg intelligence research on the Bloomberg terminal at Big Thank you again and have a great day.